2022 (10) TMI 724 - AAR - GST

Classification of services - rate of GST - Eligibility for concessional rate of GST at 12% - works contracts - execution of works for Telangana State Industrial Infrastructure Corporation Limited (TSIIC), a Government entity - Applicability of S. No. 3(vi) of the Notification No. 11/2017-Central Tax (Rate), dated 28-6-2017, as amended by? - HELD THAT - The Memorandum of Association of TSIIC at clause III(a)(3) clearly states that the company pursues the objectives to implement the schemes of incentives, subsidies and the like formulated by the Government of Telangana or Government of India or other authorities or institutions and to administer such schemes of incentives from time to time in the interest of establishments and development of industries. Thus TSIIC organization works to further the policies of the State Government, Central Government and Local Government for development of industries in the State of Telangana. The applicant has executed works contracts for TSIIC which is a Government entity. This work is construction of IT Incubation Centre. Therefore the civil structure is meant for commerce/industry or any other business. The works contract executed by the applicant for construction of IT Incubation Centre for TSIIC falls under exception to Sr. No. 3(vi) of Notification No. 11/2017-C.T. (Rate) wherein the civil structure is meant for commerce/industry or any other business and therefore the supply of this service is taxable at the rate of 9% under CGST and SGST each.

Summary

Issues:
1. Eligibility for concessional GST rate at 12% for services provided to a Government entity.
2. Appropriate rate and classification of GST to be charged for the services provided.

Analysis:

Issue 1:
The applicant, a construction company, sought clarification on whether they are eligible for the concessional GST rate of 12% for services provided to a Government entity, specifically the Telangana State Industrial Infrastructure Corporation Limited (TSIIC). The applicant contended that since TSIIC is owned by the Government of Telangana with over 90% equity share capital, it qualifies as a Government entity. The Authority for Advance Ruling (AAR) examined the definition of a Government entity and concluded that TSIIC meets the criteria as set out in the relevant notification. The AAR further noted that for works contract services provided to a Government entity, the applicable tax rate is 12% as per the notification.

Issue 2:
The AAR delved into the nature of the works contract executed by the applicant for TSIIC, which involved the construction of an IT Incubation Centre. The AAR analyzed the purpose of the civil structure and determined that it was intended for commerce, industry, or business, falling outside the scope of the concessional rate specified in the notification. Consequently, the AAR ruled that the supply of this service is taxable at a rate of 9% under both CGST and SGST.

In conclusion, the AAR clarified that the applicant was not eligible for the concessional rate of 12% for the services provided to TSIIC and determined the appropriate GST rate and classification to be 9% under both CGST and SGST for the construction of the IT Incubation Centre.